Arun Sarin

The boss of Vodafone, the world’s biggest mobile phone operator, is having a tough time, as criticism of performance rises. Chris Blackhurst reports.

by Chris Blackhurst
Last Updated: 31 Aug 2010

It can't be much fun being Arun Sarin at the moment. I'm thinking this as I wait to see him at Vodafone's London offices on Park Lane. Sure, he's wealthy, having made a fortune from share options and as chief executive of the world's biggest mobile phone operator, receiving one of the biggest executive salaries in the UK (his total package is worth over £5 million). He's head of a young company – only 20 years old – in one of the most dynamic markets.

In terms of money, power, influence, prestige, intellectual stimulation and the sheer adrenalin that must come with running such a corporation, Sarin has it all. A nice family, too – wife Rummi, a daughter at Stanford, a son still at school – and, seemingly, good health. Yet this is a troubling time. The knives are out for him (you could say they've never been put away since he was appointed three years ago).

As a foreigner, born in India, schooled in business in America, with no experience of management of a major company in this country, Sarin's introduction was bound to be difficult. But there's also something else going on. He seems to have upset the old guard at Vodafone and the City. Both are dismayed by the company's performance compared with the past, when it grew at a phenomenal rate. Under Sarin, the growth has slowed. The media, scenting a story, if not blood, have relished the discord. The party to celebrate Vodafone's 20th birthday was a glittering affair, held in London's Banqueting House in Whitehall, attended by business and political heavyweights. But it also served as a reminder of how the company used to be.

Previously, Sarin had warned of tightness on margins and disclosed a £5 billon tax liability. The City's response then was to wipe 11% off the share price. Meanwhile, the doubts linger: over Japan, where Vodafone has struggled; over the new 3G technology, in which the company has invested heavily but for little substantial return; and over Sarin's ability to shape a sprawling network of subsidiaries across different countries into a cohesive, cost-efficient structure.

Even the announcement that Lord MacLaurin was retiring as chairman, to be replaced by Sir John Bond of HSBC, was an excuse for more Sarin-baiting. Bond, Sarin's opponents suggested with a nod and a wink, would be reviewing performance.

A deal to buy Telsim, the second-biggest mobile firm in Turkey (Europe's second most populous country) was a cue for further criticism. In paying £2.6 billion, it was said Sarin had offered way too much. The reaction to what should have been positive news was to mark the shares down further. One large shareholder has apparently gone so far as to describe 2006 as Sarin's make-or-break year.

Given all that, I'm not sure what to expect. I saw him at the birthday bash and thought his performance fine. There was no doubting that the top stars on parade that night were Sir Ernie Harrison, Vodafone's veteran founder, and Sir Chris Gent, Sarin's predecessor, who had steered the company through its series of acquisitions in the US, Germany and Japan. At a gala dedicated to looking back, it was difficult for Sarin to make much of an impression.

He was all smiles that evening. If by now the beam had vanished, I wouldn't be surprised. Indeed, I wouldn't be surprised if Sarin cut a forlorn, nervy figure, such is the opprobrium he's had to endure. Yet there's no sense of edginess, no obvious sign of anyone fighting for their reputation. Far from it: Sarin is all hustle, bustle and purpose as he appears from down the corridor, walking very fast. He looks relaxed and confident, his white teeth flashing a pleasant grin.

We head for a small corner office, he offers me the leather sofa and he flings himself into a small armchair. He's not a big man but he fills the chair. Unintentionally, it gives him a 'come on, ask me anything you want' posture. He comes across as straightforward, keen, sharply intelligent. Charismatic, too – he talks with his eyes and his hands as well as with his mouth. We start with the most recent issue. How does he feel about the coverage of the Turkey purchase? 'In the main, I'm pleased. What, strategically, nobody argues with is Turkey. It's a large country – 72 million people, 53% with handsets, 47% of the population under 25. There's all that chit-chat.' He pauses. 'Then there's the financial part. That says, based on conventional measures, it's pricy.'

Telsim was in virtual receivership. Sarin could have sat back and watched one of Vodafone's rivals steal a march by buying the chance to establish a strong presence in a potentially huge market. Or he could have bought. He bought. He makes no apologies for it. 'Part of my philosophy is to do interesting things. If you're not doing them, someone is eating your lunch.'

One of the features of Sarin is his personable, down-to-earth charm. He can talk US management speak as well as the next MBA, but he also laces it with home truths. Possibly, it's the Indian in him that keeps his feet on the ground, never letting himself get too carried away. You can see why it is said of Sarin that he is better at talking to his own troops than he is to the City. He's worried lest people get the wrong impression over Turkey. He is not embarking on a plan of global expansion at all costs. 'Listen, 75% of the economic value of our company is here in the UK. For us to protect and enhance our value here is critical. It doesn't mean we do dumb things financially. We walked away from AT&T and South Africa, then we did deals in Romania, South Africa and now this.'

So, cut to the jugular. Is this the make-or-break year? Sarin sits back and puts on a beatific smile – it's as if there is a switch somewhere, such is the illuminating effect. 'I don't think so.' He leans forward, serious. 'Anyone spending time running a large enterprise will tell you every tenure has its challenges. There are bound to be ups and downs. In our case, the whole industry is going through a period of change. We don't know how things like voice and text, BlackBerry services, TV on mobiles will develop. This is a great moment in our industry for change.'

He talks fast and animatedly. 'Vodafone is a company that was created out of big mergers – with AirTouch, Mannesmann, and in Japan. Now we're changing the company – that means change in our culture, change in our organisation. But change isn't easy. It's happening everywhere, to companies and to governments, to the Bank of England where I was this morning – everybody is undergoing change.'

At Vodafone, 'that means asking ourselves: where are we going to be in the future? What will give us a competitive edge? Yesterday is about the past – nobody cares about yesterday.' But they did at the anniversary party. 'That party was meant to recognise the past achievements of the company. But we have to look at the future. We don't measure what we do in terms of 20 years or last year. This is a continuous company that is continuously driving profit and revenue growth, and continuously innovating. Change creates anxiety. Some people are nervous – I can understand that. They think the wheels are coming off.' Yes, but what about the last set of results, which he accompanied with news of the tax liability and the gloomier outlook, resulting in the 11% share price fall – wasn't he surprised by that? 'Yes, I was. Our advisers said we would be off 2%-3%. They were excellent financial results, but we gave some future guidance for the next 18 months. Everything we're doing is in line with others. We're nervous about where the industry is going – regulations are coming in. People think we control the industry, but we don't – we're one important company in the industry. We have to let the game be played.'

The way Sarin sees it, he said too much about competition and prospects, when, possibly, someone else in his position might have stayed tight-lipped. That, though, is the way he is. 'My policy is that if you are running a large company today, you have to be absolutely transparent.'

In a dig at his forbears, he adds: 'That wasn't always apparent from times gone by, when the policy appeared to be to let a few know, then a few more. Maybe we were that kind of company in the past. Today, we have to be transparent. We've got thousands of shareholders and they must have full disclosure – that's who we are.'

There's more. 'I read that past directors called us naïve for the way we handled the news. Well, are we naïve or are we ethical? We are ethical. We have the responsibility of being a large global player. There are some people who struggle with how we've changed, but let me remind them we are the fourth-biggest business in the UK, the 15th in the world.'

With that size, he says, comes responsibilities. He's on a roll now and there's no stopping him. 'We are making a real company, not just a bunch of assets – that is not a real company. A real company is one where there is a deep management bench, where there's a good process for getting things done, where there's co-operation between the companies in the group.'

He's leaning forward again. 'Do you know, our executives circulate round the world, so Bill Morrow has gone from the UK to head Japan, the guy in New Zealand has come to the UK, we have an Australian via Sweden running the Czech Republic.' Having a global presence produces change. 'It requires ethical underpinning. We want to be a great company as opposed to a collection of assets.'

This is strong stuff. The implications of what he is saying are obvious: that he inherited a business that wasn't as strong as its size suggests; was structurally unsound; and that by remedying the faults – by supplying 'ethical underpinning', as he calls it – he has attracted disdain from those who remember the Vodafone of the past.

There's a driven core to Sarin. You suspect he's had it all his life, from growing up the son of an Indian army officer and being sent to boarding school in Bangalore (his family had been wealthy, but fell on straitened times after Partition). 'Army life teaches you a sense of discipline and this definitely stood me well later in life.'

He went to the elite Indian Institute for Technology (IIT) at Kharagpur, the equivalent of the US's MIT, purely by chance. He wanted to be an air force pilot. His mother was determined that her two sons would not join the military. She failed to dissuade his brother, who went into the army. When it was Arun's turn, she tried doubly hard and succeeded. 'It happened that some of my friends were applying to IIT at the time and they had an extra form, so I too applied.'

He excelled at the Institute, obtaining a degree in engineering, representing IIT at sport and winning the medal for his year, in recognition of his all-round ability. He was offered the chance to study for a post-graduate degree in engineering at Berkeley, California.

He fell in love with America. If someone stopped him in the street and asked his nationality, he would say 'American'. He has taken the oath of allegiance. 'My personal values are hard work, fairness and generosity. They're aligned to American values. India has given me calmness, humility and spirituality – I'm an American of Indian extraction.'

He dropped engineering, though, and plumped for an MBA. 'I was forced to analyse what I wanted to do in the future. America makes you do that. Until that point, I had done mostly what others wanted me to do – like getting into IIT or Berkeley.' He'd studied engineering for seven years and had had enough.

Armed with his MBA, he joined telephone operator Pacific Telesis. 'Two of us were hired on the same day, both ex-Berkeley business school types. I was asked to look at the mobiles industry, he went into the publishing side. Two years later, we closed down the publishing side.' He's still friendly with the other recruit, but only one of them is running a global mobiles business. 'You can't explain that – it's luck.'

It was 1984. Nobody predicted that cellular technology would take off. Sarin persuaded the board to 'make the big bet' on the fledgling technology. 'All we had was a piece of paper giving us permission to provide mobile services in the Los Angeles area for the Olympic Games of that year. We looked at it and asked: what is it going to be like in the future? There I was, with loads of landline people; there were just two of us working on new opportunities. We spent hundreds of millions of dollars, to buy San Francisco, to buy Detroit, to buy Dallas.'

Two years later, he says, 'everybody had caught on, but we kept on buying. We decided to go overseas, it was so good. We joined with Mannesmann, we went to Portugal, Italy, Spain.' By then the mobiles business had demerged from Pacific Telesis to form AirTouch. In the UK, another company, Vodafone, was also rising fast. Sarin knew its boss, Gent, and his senior team. Their paths were always crossing. 'Chris Gent said: "Why don't we put ourselves together and be a powerhouse in the world?" We did, and you could say it made us quite wealthy.' It wasn't quite as simple as that. AirTouch, where Sarin was number two to Sam Ginn, was about to be taken over by Bell Atlantic. When it heard what was going on, Vodafone, anxious to prevent the creation of a coast-to-coast network, stepped in with a proposal to buy AirTouch.

Initially, Ginn was resistant but Sarin was keen. He is wreathed in smiles at the memory – and it is quite a story, how a Pacific Telesis subsidiary originally consisting of two people came to be sold to Vodafone 15 years later for $75 billion.

Sarin could have retired there and then, having made many millions. Instead, he stayed on, at Gent's invitation, to head Vodafone in the US. He didn't stay long: Vodafone was more keen on AirTouch's interests in Europe than in the US, which soon afterwards it merged with Bell Atlantic. Sarin was effectively out of a job, although he was lucratively compensated and retained a non-executive seat on the Vodafone board.

Before he quit, however, he played one vital role for Gent, helping him assuage US investors when Vodafone launched its hostile bid for Mannesmann. It was this, plus the way he had driven AirTouch's expansion and the marriage with Vodafone, that endeared him to Gent and marked him down as his chosen successor.

By the time the call came, Sarin's career had started to drift. He ran InfoScape, the internet software firm, but that was not a happy experience and he left after nine months. 'It was 2000. I was fascinated with the internet. I thought it would change the world and the way we organise ourselves. Clearly, I was five to 10 years out of date. A number of us were out of phase. We thought it was going to happen and it didn't.' He shrugs. 'But I don't regret it – you learn more from failure than you do from success. It forces you to be introspective, to look at what went wrong. Nobody wins all the time.

Bruised, he left and gathered non-executive directorships and consultancies, and that seemed to be his lot: a multimillionaire ex-telecoms entrepreneur living in the hills of San Francisco, doing a bit here and a bit there – and having a very comfortable existence.

So why take on the Vodafone job? It's not as if he needs the money. It's unfinished business, he says, something that started out with Pacific Telesis and is still evolving. Over the years, too, he has developed a close bond with those involved. He can't just leave it.

'I've been in this industry 21 years. Most of the people at the top now I've known for years. The guy who runs Germany for us today I hired in '95 as our marketing manager. The guy in Italy was our FCO. Bill Morrow? I hired him. They're like family – we're not strangers.'

Former colleagues who worked with him as he fulfilled various roles remember him for his charm as well as his business astuteness. Jane Wales of the World Affairs Council of Northern California knew Sarin from his time on that non-profit organisation's board. 'He has a great talent for drawing people out,' she says. 'He has the capacity to show them that they have something to say. He's intellectually curious and genuinely interested, and that's very attractive.'

Adds Alex Navab, general partner of KKR, a firm that worked with Sarin when he ran Accel-KKR Telecom for a brief period: 'He is an exceptional strategic thinker, has a keen sense for execution and delivering results, and is very astute from a financial perspective. At the same time, he has great interpersonal skills and leadership capabilities.'

For all the attendant external pressure facing him now, Sarin professes to be enjoying himself. And he is calling on those interpersonal and leadership skills. So far, he's addressed 10,000 employees on trips to Vodafone's markets. Each time, he says, he comes away with a buzz, impressed by their youth, energy and ambition for the brand. 'They want to go and get the world.

He e-mails the staff regularly with 'Arun's Corner', feedback from his travels, news of what he's been doing. He writes every word himself. 'It's written in Arun-speak,' he laughs.

He also looks forward to his Tuesday early-morning conference call, when the 15 most senior executives in the organisation around the world phone in with their thoughts and views. He is a believer in 'active discussion' and stresses his is a collegiate management style. 'We're living in a world where the balance of how you deal with people is tremendously important. It's not like it was after World War II, where someone said: "I'm the general, goddamit. I tell you". That's not a model we follow.' He's delighted with the appointment of Bond. 'Ian [MacLaurin] was a very good chairman. But when he started, Vodafone was a much smaller company than the one we know today. John Bond understands this.'

Don't forget, he says, 'banking and mobile services are very similar. Banks have branches with retail customers, so do we. Banks have wholesale and corporate services, so do we. Banks use technology to differentiate themselves, so do we. John is a very global person – he's known all over the world, he's a very useful person to have. He's been on the board for a year, so he's familiar with the strategy of the firm.'

Sarin, then, is happy in his skin. 'We're running a great company that requires great changes. I cannot please everybody. This year, our number one challenge is to make 3G services come to life, to make Vodafone more efficient in cost-related matters, to realise our economies of scale.' With companies all round the world, 'random mathematics' dictate that one of them will be having a problem at any one time, he says. At the moment it's Japan, but he is confident 'we will come out of the hole there'.

He's also certain about something else. 'It sounds a bit arrogant and I don't intend it that way, but I think I am the right guy to lead this company at this stage of its life when it's morphing.' He jumps out of the chair and shakes my hand. He has to have his picture taken and then he's got a business to run.

Four tough challenges facing Sarin

1 To make 3G justify Vodafone's considerable investment in it

2 To make Vodafone a more cohesive whole and to realise cost-efficiencies

3 To solve the company's problems in Japan

4 To continue to grow the business

5 To silence his critics

SARIN in a minute

1954 Born 21 October in Pachmari, Madya Pradesh, India. Educated King George's Boarding School, Bangalore; Indian Institute of Technology, Kharagpur; University of California, Berkeley

1984 Joins Pacific Telesis Group, advises on cellular phone strategy

1994 Mobile arm of Pacific Telesis demerges into AirTouch. Becomes president and chief operating officer

1999 AirTouch sells to Vodafone; runs Vodafone USA and joins Vodafone group board

2000 Leaves Vodafone, but remains on the board; runs software internet firm InfoSpace

2003 Appointed chief executive of Vodafone.

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